Genicon going global

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Here is case study of a small medical device company considering expanding globally

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  • Imports: Russia 75%BrazilLocal C/S:ChinaInconsistent IP rulesStrong local encouragementBrazilHeavy reliance on importsRussiaVery heavy reliance on imports (75%)
  • Imports: Russia 75%BrazilLocal C/S:ChinaInconsistent IP rulesStrong local encouragementBrazilHeavy reliance on importsRussiaVery heavy reliance on imports (75%)
  • Genicon going global

    1. 1. Diagnosis • Lack of a favorable channel in the US • High bargaining power of buyers through group purchases • High regulatory costs • Startup mode: limited resources
    2. 2. The paradox Bubble size = Margin60% 40%Market
    3. 3. Tough US Market
    4. 4. And cost…Bubble size = Margin / Cost
    5. 5. Lookelsewhere…
    6. 6. Is Goliath weak there
    7. 7. What else is good for a startup? • Disorganized channel • Low public contribution (govts usually have high bargaining power; may prefer local) • Easy regulation
    8. 8. Case Information • Economy • Health Care situation • Regulation • Medical Device Industry
    9. 9. Brazil- Qualifiables Positives • Government committed to expanding access to essential healthcare…10% GDP. • Regulation: International Standards generally accepted • Swift registration process (takes 10 mo., valid 5 years) • Few large-scale domestic manufacturers • Large, rapidly growing market • U.S. accounts for 50% import market • Unlike many other emerging markets- • Low import tariffs • No import duties • No value-added taxes
    10. 10. Brazil- Qualifiables • Negatives • Medical device distribution highly fragmented • 3000 importers/distributors • Expected to consolidate creating greater market access
    11. 11. Russia- Qualifiables Positives • The $1.98 Billion Medical device sector displayed robust long term growth • Public and Private Healthcare spending could be 3.8 percent of GDP which could reach $97.4 Billion by 2013 • The Russian economy is expanding and so are healthcare investments • By 2013 a CAGR of 7.74 percent was expected with for the medical device market and is predicted to have a market valuation of $2.88 billion • Imports contribute to 75% of the market in spite of the economic crisis giving local manufacturers an opportunity as the price of imported products rose sharply starting in 2005
    12. 12. Russia- Qualifiables • Negatives • Potential changes to legislation could worsen Tariffs on medical devices are expected to drop to an average of 5% with Russia potentially entering the WTO • Government could seek methods to increase the market share of local producers using methods like increasing tariffs • Local manufacturers have sales of about $1.98 billion
    13. 13. India- Qualifiables Positives • Regulations Improving Continually; becoming more transparent • $2.35 billion market for Medical Device Technology • Private sector accounts for ~75% of Health Care Spending • Imported High end Goods increase its share • Reduction of levies & Increase of foreign firms • Medical Devices rise by 23% expected YOY(2005-06)
    14. 14. India- Qualifiables Negatives • Poor, (but emerging) population •Intellectual Property Laws are lacking •Shortage of Staff in Private and Public sector •Private sector accounts for ~75% of Health Care Spending
    15. 15. China- Qualifiables Positives • Medical device market accelerating by 12.87% YOY • Population = 1.3 billion (ageing population), although population is highly segmented • Foreign medical device manufacturers are expected to increase their presence
    16. 16. China- Qualifiables Negatives • Heavy resistance to foreign imports • Although Population = 1.3 billion (ageing population), its highly segmented • foreign competition gaining presence • The regulatory framework is hindering the path toward efficient operations in the medical industry, but improvements expected in the next couple of years
    17. 17. How do we decide?• Regulation / Compliance • Brazil: international accepted! Fast process • Import resistance • Russia: weak teeth/ political; • Brazil: zero tariff! • India: somewhat hopeful • Russia: 75% potential but strong push for local • China: uncertain, seems difficult and slow • India: Moderate; China : High• Bargaining power of buyers • Political • Russia : Indirect govt. funding • Russia, China unfavorable • Brazil: heavy direct govt spending • Brazil looks much better • China and India: favorable privatization trend • Size and Growth• Local competition / Saturation/Price pressure • Cost advantage • China Local players, price pressures • how about geography • Russia: local encouragement • Early entry advantage • India: nothing mentioned (better) • Market similarity
    18. 18. 2520 Does size matter? Brazil15 Russi a India10 5 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
    19. 19. Barrier to entry Brazil Russia India China Regulation Import-resistance Local-C/S Buyer power
    20. 20. Finalists Brazil China   Regulation Import-resistance Local-C/S Buyer power
    21. 21. How about Europe? • A startup can easily make a small dent • Hard to expand • Margin/Cost information not available for BRIC
    22. 22. Recommendation • Enter Brazil • Keep an eye on China • Maintain status-quo in high Margin/Cost countries like Spain and Greece • Consider exiting low Margin/Cost countries like Italy (sorry Professor)

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